As Philadelphia experiences one of its biggest development booms in recent history, a tax on new construction to fund affordable housing moved one step closer to passage Wednesday. The Council’s Finance Committee voted 6-3 to advance the measure to the full Council for approval despite pressure from the city’s building trades to abandon the plan, concerns from the Kenney administration about its effect on businesses, and criticism from housing advocates who said the levy could end up benefiting wealthier Philadelphians.
In 2013, Philadelphia made a major overhaul of its property tax system after criticism that real estate throughout the city was severely undervalued. To fix the issue, former Mayor Michael Nutter forced a radical citywide reappraisal, known as the Actual Value Initiative. At that time, officials pledged to conduct annual citywide reassessments in order to bring the issue to final closure. But, in practice, Philadelphians have instead witnessed sporadic and sometimes seemingly inconsistent appraisals that have varied year to year. Now, the investment community is concerned the unpredictable reassessments may also be quietly eroding the viability of future development projects.
After Amazon announced plans in September to build a second headquarters (HQ2) in an undetermined location, hundreds of local officials across North America have submitted proposals to try and win the $5 billion construction investment and 50,000 new jobs for their city. In an effort to lure Amazon, proposals boast potential tax breaks, local benefits and opportunities.
However, Moody’s Analytics metro area analysts ranked the largest metro areas using a data driven approach, and made the case for an individual city based on qualitative judgment. The analysts looked at five factors: business environment, human capital, cost, quality of life, and transportation. It then assigned a number to each city and a weight to each factor to come up with its list of 10 cities. An additional category, geography, was considered, but was not factored into the rankings. Moody's excluded Seattle, the site of Amazon's current headquarters, from consideration.
Below are Amazon's Top 10 Cities, according to Moody's Analytics:
Philadelphia commercial property owners should expect major increases when they receive their property assessments mid-April. The value of the taxable portion of Philadelphia’s 14,000 commercial buildings went up by nearly 40 percent — from $14.4 billion to $19.7 billion — with the reassessments, an increase that will contribute to the expected $118 million in new tax revenue to be split between the city and school district. This is the first full reassessment of commercial properties since the controversial Actual Value Initiative (AVI) in 2014, which uses actual market values as the assessment standard.
Continued growth in e-commerce has driven industrial vacancy to an all-time low, declining by 70 basis points from a year ago to an aggregate nationwide vacancy of 5.6 percent in the fourth quarter of 2016, according to the year-end industrial market report from real estate services firm JLL. JLL researcher Aaron Ahlburn says that the former record low vacancy was in 2000, when the rate dipped to a 7.0-8.0 percent range as a result of market expansion coming out of the dot.com bubble. Increasing competition for industrial space has caused rental rates to hit record highs, breaking the $5 per sq. ft. triple-net barrier for the first time, Ahlburn notes, and has set off a building boom.
The Delaware County Board of Assessment Appeals was court-ordered to conduct a countywide reassessment of all properties in Delaware County, Pennsylvania. The order follows a trial with a residential property owner appellant. The County Board was directed to submit a preliminary timetable by July 1, 2017 for completing the reassessment. The County is fighting the order and filed a motion for reconsideration, arguing that the Homebuilders of Delaware County are the “sponsors” of the appeal, and that they: (1) pursued and funded the litigation under a champertous agreement; (2) lack standing to maintain the action; and (3) presented an unreliable ratio study at trial. If mandated, the Delaware County reassessment will likely result in increases for most commercial properties.
Philadelphia City Council unanimously approved legislation aimed at closing the loopholes that has allowed buyers and sellers of some of the city’s biggest commercial real estate transactions to avoid or lessen the transfer tax on those deals. City Council believes the changes made to the real estate transfer tax law could add millions to public coffers. The vote comes after an analysis by The Inquirer found those loopholes being exploited more often than not in the city's biggest real estate deals, where the tax savings can be most pronounced.
Philadelphia City Councilman Al Taubenberger introduced legislation to close the loopholes that he says has allowed buyers and sellers of some of the city’s biggest commercial real estate transactions to avoid or lessen the transfer tax on those deals. The measure seeks to end a practice that has allowed the real estate transfer tax — now 4 percent, but set to increase — to be paid against a sum that is less than a property’s actual purchase price. It also would make it more difficult to avoid the transfer tax by having former owners keep a partnership stake in a property, rather than selling it outright.
The Philadelphia School District announced Tuesday that it will begin a three-year pilot program to identify undervalued properties throughout the city in an effort to increase tax dollars. The controversial “reverse tax assessment” method has become a common practice throughout Pennsylvania, where school districts file real estate assessment appeals seeking to increase property assessments and overall tax revenue. The Philadelphia School District will seek proposals from law firms, real estate appraisers and other professionals to help identify properties that are assessed at least $1 million under their actual value and appeal those assessments. While the district says it isn’t only targeting commercial properties, it’s likely that most of the parcels affected would fit that description.
As online retailers shift their focus to two-day and same-day package delivery, warehouse builders are beginning to redraw the map of logistics hubs on the East Coast. Historically, the area around the central Pennsylvania towns of Harrisburg and York has hosted large clusters of warehouse space because of light zoning restrictions, access to several large city population centers and ample cheap land to build on. But in the last five years warehouse development in the Lehigh Valley, which is to the north and closer to New York City, has surged, according to brokerage CBRE Inc. Over the weekend, FedEx Ground, broke ground for its largest facility in the country, an 800,000-square-foot automated distribution center in Allen Township, Pa., adding a large chunk of space to the cluster of logistics real estate in the state’s Lehigh Valley area.